Medicare Cost Projections Big Election Year Issue

WASHINGTON – The much larger projected cost of the new Medicare (search) law is giving an even more prominent place to an issue both parties already planned to highlight this election year.

Democrats said the dramatically increased estimate — from $395 billion to $534 billion over 10 years — adds to a mountain of evidence that the law needs to be changed, even before much of it has gone into effect.

Principal among their proposals is repealing the law's provision that bars the government from negotiating drug prices with manufacturers when seniors begin receiving Medicare prescription drug benefits in 2006.

"We must address the out-of-control cost of prescription drugs. If Republicans continue to defend the drug companies and the insurance industry, the cost of the bill will only increase," Senate Democratic leader Tom Daschle (search) of South Dakota said Friday.

Daschle and other Democrats demanded hearings on the new estimate. "If the administration possessed this analysis prior to final congressional action, its failure to share these figures would be both misleading and inexcusable," the senators wrote in a letter to the Senate Finance Committee.

President Bush said Friday that he was given the higher number two weeks ago in the first detailed estimate of the new law's cost. Democrats on the House Ways and Means Committee (search) made public a June analysis of the Medicare overhaul's cost that they said cast doubt on the president's assertion.

Republicans have said any changes to the law are unlikely this year as they have laid claim to an issue Democrats have long dominated. The president has said repeatedly in recent weeks that he will veto any efforts to change the Medicare law.

Allowing the government to negotiate drug prices got a boost Friday from Sen. Arlen Specter, R-Pa., chairman of the Senate Appropriations health subcommittee. "That provision, for example, is going to be revisited," he said.

The increased cost estimate is the latest in a series of bumps for the administration and congressional Republicans since the legislation won congressional approval two months ago.

Opponents of the bill have been troubled by the revelation that Tom Scully, the former top Medicare official, worked on the legislation while being courted by various law firms. Scully, who later took a job at Atlanta-based Alston & Bird's health care group, had a waiver from his agency's top ethics official to work on the bill.

The White House announced a change in the ethics policy after Scully's departure, saying the administration and not individual Cabinet departments would decide when to grant ethics waivers in the future.

Rep. Billy Tauzin, R-La., who was deeply involved in drafting the bill as chairman of the House Energy and Commerce Committee, is reportedly being considered for a top lobbyist's job with the pharmaceutical industry.

Referring to Tauzin, House Democratic leader Nancy Pelosi of California said: "Seniors who are wondering why pharmaceutical companies made out so well in this bill need only look at this example of abuse of power and conflict of interest."

Spokesman Ken Johnson replied that Tauzin has received no formal job offer and made no decision about leaving Congress.

Democrats also have criticized more than $1 billion in increased payments to managed care plans that begin this year, while seniors won't have drug insurance through Medicare until 2006.

Several conservative Republicans said that had the higher numbers been known before final and narrow congressional approval, the bill might have been defeated.

The House approved the Medicare overhaul, with its prescription drug benefit for older and disabled Americans, by a 220-215 vote, after a middle-of-the night, three-hour roll call during which GOP leaders pressed reluctant lawmakers to support the legislation. Roll call votes typically last 15 minutes.

Other lawmakers, though, said the administration's estimate of the cost, while higher than $400 billion, was not necessarily any more accurate than the $395 billion figure provided by the Congressional Budget Office and relied on by the White House and top Republican lawmakers.

The CBO estimate remains below $400 billion, said Rep. David Vitter, R-La., one of nine Republicans who voted for the legislation after listing their conditions for support, including a price tag of no more than $400 billion.

Congressional sources said the $139 billion gap in the estimates reflects differing assumptions in the new law about how many older Americans would join managed-care plans and how many low-income seniors would take advantage of subsidized drug coverage.

Republicans point to health maintenance organizations and preferred provider networks as critical to helping hold down the costs of Medicare.

Yet the administration has all along assumed that more older Americans would join managed care plans than the CBO has estimated.

That prospect actually would make the law more expensive, not less, said Joseph Antos, a health policy expert at the conservative American Enterprise Institute, because the government will pay HMOs fixed amounts, regardless of whether seniors use medical services.

The administration also believes that more low-income elderly will sign up for subsidized drug coverage, which will add to the cost, sources said.